Base effect pushes June factory output to 5-month high (Roundup)

New Delhi : Favourable base effect, along with higher production of consumer durables, capital and infrastructure goods, accelerated the growth of India's June industrial output at its fastest pace in the last five months.

The Central Statistics Office (CSO)'s data released on Friday showed a rise of 7 per cent in the Index of Industrial Production (IIP) during June from a rise of 3.9 per cent in May.

However, it had recorded a marginal decline of (-) 0.3 per cent in the corresponding period of last year.

"The cumulative growth for the period April-June 2018 over the corresponding period of the previous year stands at 5.2 per cent," the CSO said in the Quick Estimates of IIP statement.

As per the data, the sequential and year-on-year uptrend in factory output was broad based as the manufacturing sector expanded by 6.9 per cent, while the mining sector's output rose by 6.6 per cent and the sub-index of electricity generation increased by 8.5 per cent.

Among the six use-based classification groups, the output of primary goods which has the highest weightage of 34.04 grew by 9.3 per cent. The output of intermediate goods which has the second highest weightage rose by 2.4 per cent.

Similarly, consumer non-durables output rose during the month under review. It rose by 0.5 per cent and that of consumer durables by 13.1 per cent.

In addition, infrastructure or construction goods' output increased by 8.5 per cent and capital goods by 9.6 per cent.

"The encouraging news is the jump in the production of capital goods and infrastructure/ construction goods. Even on a low base of last year, this could be the reflection of the positive investment trend, in sectors such as roads, railways and affordable housing. What is also noteworthy is the spike in consumer durables demand," CII Director General Chandrajit Banerjee was quoted as saying in a statement.

Industry body Assocham described the latest estimates of IIP as a positive sign for overall industrial activity in India.

The business body's Secretary General D.S. Rawat said that it is extremely important for the growth momentum and that the Central government should initiate more effective short term revival measures.

B. Prasanna, Group Executive and Head Global Markets Group, ICICI Bank, pointed out: "...we are slightly concerned with the weakness in consumer non-durables, though this could reverse on the back of normal monsoon and government support aiding rural income as we go ahead."

According to Devendra Kumar Pant, Chief Economist, India Ratings and Research: "All sectors, use based or broad based, contributed to industrial recovery."

"Strong growth was supported by base effect, in run-up to GST implementation, IIP manufacturing growth contracted by 0.7 per cent in June 2017 and overall IIP growth contracted by 0.3 per cent. Nonetheless, 7 per cent IIP growth in June 2018 is impressive after two-consecutive months of below 5 per cent growth."